Australian investor returns hit ‘peak’ after dip in investment

Investors are flocking back to the market after a three-month dip in returns following the Great Recession.

The number of Australians investing in Australian stocks and commodities has doubled since the start of the year, and that trend is likely to continue into next year, according to data from Australia’s Securities Industry and Investment Commission. 

Apex, the second-biggest Australian stock index, rose 9.4 per cent on Thursday to reach a record high of 7,838.5. 

It was the second highest gain of the day, ahead of a 10.2 per cent gain in the broader benchmark index.

The benchmark index of Australian shares rose 1.4% to 1,933.9. 

Australia’s biggest listed company, BHP, has jumped 12.9 per cent in the past week, while the company that made up the majority of the sector’s revenues, Westpac, has climbed 2.9% over the same period. 

The index has rallied in recent weeks amid the global financial crisis, when it fell by a total of 4.4 percentage points in a year.

The SISAC data was published on Thursday and shows that the total market capitalisation of the Australian stock market rose by almost $100 billion last year, more than doubling from $37.6 billion in 2015. 

“Investors are starting to feel a little more confident,” says Paul Smith, chief investment officer at brokerage KPMG.

“It’s just that they’re not getting any returns.”

Mr Smith says investors are now turning to smaller companies with a “fresh outlook”, with the SISEC data indicating a dip in growth. 

However, there is still a lot of volatility around the Australian market, with the Australian dollar trading at about 77.5 US cents, down slightly from 80 US cents on Tuesday.

“The market has a little bit of bounce to it now,” Mr Smith says.

“But there’s still a long way to go.”

The stock market has fallen from a peak of almost $US50 billion a year ago, with much of that money being wiped out by the global crisis, to around $US20 billion now.

Australia’s top 20 listed companies have lost almost $10 billion in value over the past year, with four of them selling their shares.

Apex has lost about $2.3 billion, with BHP losing more than $3 billion.

BHP’s shares have fallen more than 70 per cent from their peak in January 2016.

While the recent rally in the Australian share market has been great news for investors, there are some risks ahead, according the head of investment research at Melbourne-based fund MSC Global Asset Management, Alex Mancuso.

Mancuse says investors should be wary of taking too much comfort from the SISA data.

Mr Mancoso says there are risks in the market, including the risk of overvaluation in the US dollar and falling oil prices.

“Investments are becoming more volatile,” he says.

He says there is also a risk that investors are not using the data properly.

“The real question is how long can you keep it going?” he says, pointing to a recent decline in the price of a stock.

“[The SISA] is just an indicator, but you can’t rely on that.”